Insurance & Third Parties
Civil Liability Act
Proof of claims for damages or contribution in bankruptcy.
61.—(1) Notwithstanding any other enactment or any rule of law, a claim for damages or contribution in respect of a wrong shall be provable in bankruptcy where the wrong out of which the liability to damages or the right to contribution arose was committed before the time of the bankruptcy.
(2) Where the damages or contribution have not been and cannot be otherwise liquidated or ascertained, the court may make such order as to it seems fit for the assessment of the damages or contribution, and the amount when so assessed shall be provable as if it were a debt due at the time of the bankruptcy.
(3) Where a claim for contribution or in respect of a judgment debt for contribution is provable in bankruptcy, no such proof shall be admitted except to the extent that the claimant has satisfied the debt or damages of the injured person, unless the injured person does not prove in respect of the wrong or debt.
Annotations
Modifications (not altering text):
C29
Application of section modified (1.01.1989) by Bankruptcy Act 1988 (27/1988), s. 75, S.I. No. 348 of 1988.
Debts provable in bankruptcy and arrangements.
75.— …
(3) Where all necessary parties agree, an order for assessment of damages or contribution under section 61 (2) of the Civil Liability Act, 1961, may be made by the Court, notwithstanding that it may not be the court by or before which the claim for damages or contribution falls to be determined.
…
C30
Application of section not affected (1.01.1989) by Bankruptcy Act 1988 (27/1988), s. 76 and sch. 1, para. 18, S.I. No. 348 of 1988.
Proof of debts.
(cf. 1857, s. 246 in pt.)
76.—The provisions of the First Schedule shall apply in relation to the proof of debts.
FIRST SCHEDULE
Proof of Debts
…
18. This Schedule is without prejudice to section 61 of the Civil Liability Act, 1961 (which provides for proof of claims for damages or contribution in respect of a wrong) and section 62 of the said Act (which provides for the application of moneys payable under certain policies of insurance where the insured becomes a bankrupt).
…
Application of moneys payable under certain policies of insurance.
62.—Where a person (hereinafter referred to as the insured) who has effected a policy of insurance in respect of liability for a wrong, if an individual, becomes a bankrupt or dies or, if a corporate body, is wound up or, if a partnership or other unincorporated association, is dissolved, moneys payable to the insured under the policy shall be applicable only to discharging in full all valid claims against the insured in respect of which those moneys are payable, and no part of those moneys shall be assets of the insured or applicable to the payment of the debts (other than those claims) of the insured in the bankruptcy or in the administration of the estate of the insured or in the winding-up or dissolution, and no such claim shall be provable in the bankruptcy, administration, winding-up or dissolution.
Annotations
Modifications (not altering text):
C31
Application of section not affected (1.01.1989) by Bankruptcy Act 1988 (27/1988), s. 76 and sch. 1, para. 18, S.I. No. 348 of 1988.
Proof of debts.
(cf. 1857, s. 246 in pt.)
76.—The provisions of the First Schedule shall apply in relation to the proof of debts.
FIRST SCHEDULE
Proof of Debts
…
18. This Schedule is without prejudice to section 61 of the Civil Liability Act, 1961 (which provides for proof of claims for damages or contribution in respect of a wrong) and section 62 of the said Act (which provides for the application of moneys payable under certain policies of insurance where the insured becomes a bankrupt).
…
Road Traffic Act
Miscellaneous provisions in relation to insured or guaranteed moneys.
76.—(1) Where a person (in this section referred to as the claimant) claims to be entitled to recover from the owner of a mechanically propelled vehicle or from a person (other than the owner) using a mechanically propelled vehicle (in this section referred to as the user), or has in any court of justice (in proceedings of which the vehicle insurer or vehicle guarantor hereinafter mentioned had prior notification) recovered judgment against the owner or user for, a sum (whether liquidated or unliquidated) against the liability for which the owner or user is insured by an approved policy of insurance or the payment of which by the owner or user is guaranteed by an approved guarantee, the claimant may serve by registered post, on the vehicle insurer by whom the policy was issued, or on the vehicle insurer or the vehicle guarantor by whom the guarantee was issued, a notice in writing of the claim or judgment for the sum, and upon the service of the notice such of the following provisions as are applicable shall, subject to subsection (2) of this section, have effect:
(a) the insurer shall not after service of the notice pay to the owner or user in respect of the sum any greater amount than the amount (if any) which the owner or user has actually paid to the claimant in respect of the sum;
(b) where the claimant has so recovered judgment for the sum, or after service of the notice so recovers judgment for the sum or any part thereof, the insurer or guarantor shall pay to the claimant so much of the moneys (whether damages or costs) for which judgment was or is so recovered as the insurer or guarantor has insured or guaranteed and is not otherwise paid to the claimant, and the payment shall, as against the insured or principal debtor, be a valid payment under the policy or guarantee;
(c) where the claimant has so recovered judgment for the sum, or after service of the notice so recovers judgment for the sum or any part thereof, and has not recovered from the owner or user or such insurer or guarantor the whole amount of the judgment, the claimant may apply to the court in which he recovered the judgment for leave to execute the judgment against the insurer or guarantor, and thereupon the court may, if it thinks proper, grant the application either in respect of the whole amount of the judgment or in respect of any specified part of that amount;
(d) where the claimant has not so recovered judgment for the sum, the claimant may apply to any court of competent jurisdiction in which he might institute proceedings for the recovery of the sum from the owner or user for leave to institute and prosecute those proceedings against the insurer or guarantor (as the case may be) in lieu of the owner or user, and the court, if satisfied that the owner or user is not in the State, or cannot be found or cannot be served with the process of the court, or that it is for any other reason just and equitable that the application should be granted, may grant the application, and thereupon the claimant shall be entitled to institute and prosecute those proceedings against the insurer or guarantor, and to recover therein from the insurer or guarantor any sum which he would be entitled to recover from the owner or user and the payment of which the insurer or guarantor has insured or guaranteed;
(e) the insurer or guarantor shall not, as a ground for refusing payment of moneys to the claimant or as a defence to proceedings by the claimant, rely on or plead any invalidity of the policy or guarantee arising from any fraud or any misrepresentation or false statement (whether fraudulent or innocent) to which the claimant was not a party or privy and which, if constituting F169[an offence] under this Part of this Act, was not the subject of a prosecution and conviction under the relevant section of this Act.
(2) Where, in respect of any one act of negligence or any one series of acts of negligence collectively constituting one event, there are two or more claimants and the total of the sums claimed for damages for injury to property or for which judgment has been recovered for damages for such injury exceeds the sum which the insurer or guarantor has insured or guaranteed, the liability, as regards each claimant, of the insurer or guarantor in relation to such damages shall be reduced to the appropriate proportionate part of the sum insured or guaranteed.
(3) Subsections (1) and (2) of this section apply only to claims against the liability for which an approved policy of insurance or an approved guarantee is required by this Act to be effected.
(4) F170[…]
(5) A reference in this section to the owner or user of a mechanically propelled vehicle shall, where the context so admits, be construed as including a reference to his personal representative.
Annotations
Amendments:
F169
Substituted (1.09.1968) by Road Traffic Act 1968 (25/1968), s. 6 and sch., S.I. No. 169 of 1968.
F170
Repealed (17.08.1961) by Civil Liability Act 1961 (41/1961), s. 5 and sch., part V, commenced on enactment.
Modifications (not altering text):
C57
Application of section modified (1.05.1962) by Road Traffic (Compulsory Insurance) Regulations 1962 (S.I. No. 14 of 1962), reg. 5 and sch. 1, para. (2), as amended (18.03.1964) by Road Traffic (Compulsory Insurance) (Amendment) Regulations 1964 (S.I. No. 58 of 1964), reg. 2, (23.11.1977) by Road Traffic (Compulsory Insurance) (Amendment) Regulations 1977 (S.I. No. 359 of 1977), reg. 2, (31.12.1988) by Road Traffic (Compulsory Insurance) (Amendment) Regulations 1987 (S.I. No. 321 of 1987), reg. 4 and later amended (4.07.2008) by European Communities (Motor Insurance) Regulations 2008 (S.I. No. 248 of 2008), reg. 4.
5.—(1) In this article “prohibited condition” means every condition, restriction or limitation on the liability of the insurer or guarantor under an approved policy of insurance or an approved guarantee which comes within any of the classes specified in the First Schedule to these Regulations or any other condition, restriction or limitation which has substantially the same effect as a condition, restriction or limitation which is so specified.
(2) There shall not be inserted in an approved policy of insurance or an approved guarantee any condition, restriction or limitation on the liability of the insurer or guarantor which affects the right of any person, except the person to whom the policy or guarantee was issued […], to recover by virtue of the policy or guarantee an amount under section 76 of the act or which could have the effect of reducing the amount which such a person could so recover, if such condition, restriction or limitation is a prohibited condition.
FIRST SCHEDULE
PROHIBITED CONDITIONS
(1)…
(2) Any limitation or restriction on the persons or classes of persons or the physical or mental condition of persons whose driving of a vehicle is covered by the approved policy of insurance or approved guarantee, except conditions which limit the persons so covered in any one or more of the following ways:—
…
(e) by requiring persons so covered to have the consent of a named person to such driving,
(f) by limiting the cover to cases where the person driving a vehicle either holds a driving licence to drive the vehicle or holds a provisional licence to drive the vehicle or having held either such licence or a driving licence issued under Part III of the Road Traffic Act, 1933 to drive such a vehicle has not been disqualified for holding it under section 26, 27 or 28 of the Act or under a disqualification order which is deemed to be a consequential disqualification order, an ancillary disqualification order or a special disqualification order by virtue of section 43 of the Act,
(g) by limiting the cover to cases where the person driving a vehicle holds a licence to drive a licensed public hire vehicle under article 34 or article 62 of the Road Traffic (Public Service Vehicles) Regulations, 1963 ( S.I. No. 191 of 1963 ) or having held such a licence or a licence to drive a public service vehicle under the Road Traffic Act, 1933 has not ceased to do so by reason of such licence being revoked under those Regulations or suspended or revoked under that Act.
…
The conditions referred to at (e), (f) and (g) of paragraph (2) shall provide that the limitations or restrictions shall not apply as respects a claim by a person to recover moneys from the insurer under section 76 of the Act.
Application and repayment of deposit.
77.—(1) In this section “deposit” means a deposit under section 61 of this Act.
(2) Where a person has recovered judgment in any court against the depositor of a deposit for a sum to which this section applies, the High Court may, on the application of that person and if satisfied that the depositor has no goods which can be taken in execution to satisfy the judgment, order the amount of the judgment, together with the costs of the order, the application therefor and the proceedings thereunder, to be paid by the Accountant of the Courts of Justice out of the deposit.
(3) Where the amount of a judgment is paid under this section out of a deposit, the depositor may deposit with the Accountant of the Courts of Justice a sum equal to the sum paid out, and until he does so, he, shall be deemed not to comply with the provisions of this Part of this Act relating to the making of deposits.
(4) Where the depositor of a deposit, if an individual, becomes bankrupt or insolvent or dies or, if a corporate body, is wound up or, if a partnership or other unincorporated association, is dissolved, the deposit shall be applied, firstly, in payment of liabilities for sums to which this section applies and, secondly, as general assets.
(5) Where the High Court is satisfied, on the application of the depositor of a deposit or a person claiming through or under him and after notice to F171[the Minister] and after such publication of advertisements as the High Court directs, that the deposit should be paid out to the applicant, the High Court may order it to be so paid out either unconditionally or subject to conditions.
(6) Each of the following sums shall, for the purposes of the foregoing subsections of this section, be a sum to which this section applies:
(a) a sum against the liability for which the depositor of a deposit, being a vehicle guarantor, is guarantor under an approved guarantee,
(b) a sum against the liability for which the depositor of a deposit, being a vehicle guarantor or an exempted person, would, if he were not such depositor, have been required by this Act to have effected an approved policy of insurance or an approved guarantee.
Annotations
Amendments:
F171
Substituted (13.01.1971) by Road Traffic Act 1968 (25/1968), s. 6 and sch., S.I. No. 6 of 1971.
UK Cases 1930 Act
Post Office v Norwich Union Fire Insurance Society
[1967] 1 Lloyd’s Rep 216
LORD DENNlNG MR
It seems to me that the insured only acquires a right to sue for the money when his liability to the injured person has been established so as to give rise to a right of indemnity. His liability to the injured person must be ascertained and determined to exist, either by judgment of the Court or by an award in an arbitration or by agreement. Until that is done, the right to an indemnity does not arise. I agree with the statement by Devlin J (as he then was), in West, Wake, Price & Co v Ching,
‘… The assured cannot recover anything under the main indemnity clause or make any claim against the underwriters until they have been found liable and so sustained a loss ‘
Under the section it is clear to me that the injured person cannot sue the insurance company except in such circumstances as the insured himself could have sued the insurance company. The insured could only have sued for an indemnity when his liability to the third person was established and the amount of the loss ascertained. In some circumstances the insured might sue earlier for a declaration, eg, if the insured company were repudiating the policy for some reason. But where the policy is admittedly good, the insured cannot sue for an indemnity until his own liability to the third person is ascertained.
In these circumstances I think the right to sue for these moneys does not arise until the liability is established and the amount ascertained. How is this to be done? lf there is an unascertained claim for damages in tort, it cannot be proved in the bankruptcy: nor in the liquidation of the company. But nevertheless the injured person can bring an action against the wrongdoer. In the case of a company, he must get the leave of the court. No doubt leave would automatically be given. The insurance company can fight that action in the name of the wrongdoer. In that way liability can be established and the loss ascertained. Then the injured person can go against the insurance company.
In confirmation of this view, I would remark that at the time when the 1930 Act was passed, the practice in these Courts was to keep
secret the fact that the defendant was insured. It was misconduct on the part of Counsel to indicate to the jury that the defendant was insured. If this Act had enabled the injured person to sue the insurance company direct, before liability was ascertained, it would have cut right across that practice. I am sure that at that date the Legislature never contemplated any such thing. Of course, it is different now. We assume that the defendant in an action of tort is insured unless the contrary appears. Nevertheless, casting one’s mind back to 1930, I am sure the Legislature did not contemplate an action in tort against an insurance company direct.
There is a further point. If a third person, who suffered personal injury, could sue the insurance company direct, there would be a strange anomaly about the period of limitation. The action of the injured person against the wrongdoer (for the tort) would be barred after three years from the accident, but his action against the insurance company (as a transferee of the rights under the contract) would not be barred until six years from the accident.
This is simply a matter of procedure. I think the right procedure is for the injured person to sue the wrongdoer, and having got judgment against the wrongdoer, then make his claim against the insurance company. This attempt to sue the insurance company direct (before liability is established) is not correct.
Murray v Legal and General Assurance Society Ltd
[1969) 2 Lloyd’s Rep 405
CuMMING-BRUCE J
Did the Act merely put the plaintiff into the shoes of the insured, so as to transfer to the third party the whole bundle of the rights of the insured, subject to the whole bundle of his liabilities under the contract of insurance, or did Parliament give to the third party the privileged position of asserting the rights of the insured in respect of his liability to the plaintiff and of disregarding the liabilities of the insured to the insurers, for example, in respect of unpaid premiums? What effect must be given to the words ‘in respect of the liability’ which appear in the section? In my view, those words are of the utmost importance.
It is not all the rights and liabilities of the insured under the contract of insurance which are transferred to the third party, only
the particular rights in respect of the liability incurred by the insured to the third party. When one looks at sub-s (4), one finds the following language:
‘Upon a transfer under subsection (1) or subsection (2) of this section, the insurer shall, subject to the provisions of section three of this Act, be under the same liability to the third party as he would have been under to the insured, but …’
and then follows (a) and (b) which deal with the differences between the liability of the insurer to the insured and the liability of the insured to the third party; this shows that the draftsman in that sub-section was addressing his mind to problems that arise in connection with the liability of the insurer to the insured in relation to the particular liability of the insured to the third party. In my view this section had a carefully limited intention. There is no express transfer of liabilities of the insured to the insurer, as, for example, is to be found ins 5 of the Workmen’s Compensation Act 1906, but if there is, under the policy, a defence by way of condition available against the insured, that defence would be available against the third party.
In my view, in the words used to create the statutory subrogation,
the draftsman did carefully limit the subrogation to the rights under the contract in respect of the liability incurred by the insured to the third party. Rights which are not referable to the particular liability of the insurer to the particular third party are not transferred. Thus, all the conditions in the policy which modify or control the obligations of the insurer to cover a given liability to a third party are the subject of transfer. See, for example, the judgment of Atkinson J in Hassett v Legal and General Assurance Society Ltd.10 The right to recovery of the premiums in this case was not a term of the policy which arose in respect of the liability of the insured to the third party. The defendants are in my view left in regard thereto with the same rights as the general body of creditors, namely, to prove in the bankruptcy.
Farrell v Federated Employers’ Insurance Association Ltd
[1970] 3 All ER 632
LORD DENNING MR
On 1 November 1968, the plaintiffs solicitors issued a writ against the insurers claiming the sums of £14,500 and £292 18s 10d by virtue of a provision of the Third Parties (Rights Against Insurers) Act 1930. That Act gives an injured person a direct cause of action against the insurers whenever the insured becomes insolvent. When the insured is a company, the Act applies, among other things, on a receiver being appointed: sees 1 (1) (b). Thereupon the injured person can sue the insurers direct. But he has first to establish that the insured was liable to him for that amount: see Post Office v Norwich Union Fire Insurance Society Ltd;12 and, having done that, he stands in the shoes of the insured. But the insurers can avail themselves, as against him, of all the defences which would have been available to them as against the insured. So in this case the insurers said that the policy was issued subject to conditions on which they relied as a defence.
Counsel for the plaintiffs second point was that the condition had been fulfilled. ‘Immediate’, he said, was defined by Fletcher Moulton LJ in Coleman’s Case.13 It meant ‘with all reasonable speed considering the circumstances of the case’. He said that the writ was served here on 7 January 1966 and that notice was given to the insurers on 3 March 1966, that is, some eight weeks later. That was, he said, all reasonable speed. I do not think so. I think that, in the circumstances of the case, the plaintiffs solicitors ought to have told the insurers about the writ soon after they received the letter of 17 January 1966 from the receiver. ‘With all reasonable speed’ would mean by the end of January 1966 at latest. Instead of doing so, the solicitors went on and signed judgment on 28 February 1966, in default of appearance. Counsel for the plaintiff said that judgment made little difference. The insurers had not been prejudiced. They could easily have got that judgment set aside and have got leave to defend. That may be. But I do not see why they should be put to that trouble. The plain fact is that the writ was not notified with all reasonable speed. The condition was not fulfilled. The insurers are entitled to rely on it.
McCormick v National Motor and Accident Insurance Union Ltd
(1934) 49 LI L Rep 361
SCRUITON LJ
But the position of the plaintiffs who were suing was this. They could not have sued at all except for the Act of 1930 conferring upon third parties rights against insurers of third party risks in the event of the insured becoming insolvent. That is the only statute that gives them any right to sue, and the statute says that if the defendant becomes bankrupt, the rights of the defendant against the insurer under the contract in respect of any liability shall be transferred to and vest in the third party to whom the liability was so incurred. Now, what is transferred? The rights under the contract. You cannot take the rights under the contract separate
from defences under the contract. You cannot say: ‘I claim indemnity from you and I do not care what conditions there are in
the contract which relieve you from having to indemnify.’ What are transferred are whatever rights there are between the two parties, insurer and insured, under the contract. Consequently the rights which the statute has given to a person who is injured, on the defendant becoming bankrupt, are the rights between the two parties; and if at that time-the time of the judgment-the insurer had a defence to the claim under the policy, namely: ‘I am not bound by the policy because you have made material misrepre sentations, because you concealed material facts from me when the policy was issued’, then that defence is entitled to be used by the insurance company.
Zurich General Accident and Liability Insurance Co Ltd v Morrison
(1942) 72 LI L Rep 167
GODDARD LJ
It is not surprising, therefore, that by 1934 Parliament interfered, and by s 10 of the Act of that year they took steps towards remedyinga position which to a great extent nullified the protection that com pulsory insurance was intended to afford. Generally speaking, s 10was designed to prevent conditions in policies from defeating the rights of third parties. But insurers are still allowed to repudiate policies obtained by misrepresentation or non-disclosureof material facts. This right, however, was made subject to certain conditions and restrictions contained in sub-s (3) of s 10. It seems to me that what the Legislature had in mind was that if an insurer was intending to repudiate a policy, it was only fair that the injured third party should know the grounds on which repudiation was sought before he went to the expense of en deavouring to establish hisclaim against the assured, who, if not entitled to indemnity, might be unable to satisfy a judgment. It was to prevent an
injured party incurring further useless expense. Hence the necessity of the notice prescribed by the proviso to the sub-section.
Gray v Blackmore
(1933) 47 LIL Rep 69
BRANSON J (at 75)
It is said that there is no logical reason why, if Parliament intended, as it obviously did intend, to enact that the failure to observe conditions as to something to be done or omitted to be done after the happening of an accident should not be allowed to affect the underwriter’s liability in cases of third party claims, Parliament should not have enacted that, no matter what the parties agreed in the policy, if the car did an injury to a third party the underwriter should have to pay; but it seems to me that there is aJI the difference in the world between the two positions. A man may agree to have certain cover, and he goes forth upon the road covered according to that agreement; an accident happen r take it a little earlier, before an accident happens, what offence has he committed? He has got a policy which for all that he has hitherto done covers him, and he is saved from s 35; and yet if the policy contains conditions as to something which he must do after an accident has happened, or something which he must not do after an accident has happened, a failure on his part in that respect may enable the underwriter who was on the risk at the time when the accident happened to escape, and one can well understand the Legislature saying that that shall not be permitted. If all was in order between the assured and the underwriter at the time when the accident happened, the position cannot be altered by sub sequent breaches or by acts or omissions on the part of the assured so as to make him less able to compensate the person who has been injured; but it would be an entirely different matter for the Legislature to go back to a time before the accident had happened and to say that if anyone chooses to underwrite a policy in connection with a motor car, no limitations as to the time during which, or asto thepersons by whom, or as to the manner in which,
that vehicle can be used can have any avail to save the underwriter from liability. If that were the state of the law, it would mean that there could be no such policies as are issued at present-policies, for example, where a man insures two or three cars, warranting that only one of them shall be in use at a time, and thereby gets a reduction of premium. No underwriter would underwrite such
a policy if it could be said that, ex post facto, that condition, although broken, could not be relied upon, and that he might be liable for the damage done by three cars out at one time, although he had only insured one; and similarly one might imagine any number of ridiculous positions which would arise. I see nothing in the statute which prevents an underwriter and an assured from agreeing to a policy with any conditions that they choose; but if the assured takes the car upon the road in breach of those conditions, it cannot thereby throw a greater obligation upon the under writer.
Merchants’ and Manufacturers’ Insurance Co Ltd v Hunt
(1941) 68 LIL Rep 117
SCOTT LJ
From the extreme hardship that might otherwise result from sub-s (1), sub-s (3) gives the insurer a conditional means of escape. If he discovers that he was induced to make the contract of insurance by some material non-disclosure or misrepresentation which, by ordinary insurance law, and not merely by reason of some special stipulation which he has put in his form of policy, entitles him to avoid the contract, he may obtain a declaration to that effect from the Court, and will then be free of statutory liability to the injured third party. This legislation was obviously intended (inter aJia) to effect a fair compromise between the two desirable but conflicting object n theonehand, of protecting the public from the danger of impecunious tortfeasors on the roads, and, on the other hand, of avoiding the injustice of putting on a wholJy innocent and misled insurer the whole pecuniary burden of a policy which, neither in law nor in equity, is his policy. But it would have been unfair to confer this relief unconditionally. There was an obvious danger of the injured party being deprived of the pecuniary safeguard which was the subject of sub-s (1), through the possibility of the policy being avoided in proceedings under the first part of sub-s (3) without his knowledge, and even by collusion between the insurer and the insured. It was essential that he should have notice of any such action by the insurer, and also to be given the right to appear in it and there defend his rights. Both the requisites are met by the proviso to sub-s (3), which in effect creates two conditions precedent to the existence of the insurer’s right to get his declaration under the first part of sub-s (3). The third party gets full notice of the ground of the insurer’s claim, and is given an unqualified right to become a party in the insurer’s action; and it is particularly to be noted that he is given all the rights of a party to an action without any qualification upon them.